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Facebook Is Cheaper Than Google, But Shouldn't Be, Analyst Says

Shares of FacebookFacebook were heating up Monday, rallying almost 5% in morning trading, after a research report from Stifel Nicolaus made the case for the social network’s growth prospects in a favorable comparison with fellow technology heavyweight GoogleGoogle.

Looking out to fiscal 2015, Stifel analyst Jordan Rohan argues that Google goes for 10 times expected earnings (EBITDA), compared with Facebook’s multiple of 9.4. The analyst expects Facebook to grow earnings at 25% a year for the next half-decade though, compared with Google growth in the low-teens.

Rohan isn’t exactly calling for a massive rally — his price target of $29 is merely 25% above Friday’s close — but he points to a handful of catalysts that could drive Facebook’s stock higher and make his target look conservative.

For one thing, he predicts Facebook will be added to the S&P 500, an inclusion widely predicted. Facebook’s $59 billion market cap would make it the 59th largest company in the index (bigger than NIKENIKE, Rohan notes).

While that marks a positive external factor, the analyst also sees beneficial trends internally, noting the company seems poised to improve monetization (including that from its Instagram purchase) and “is making the transition from social media to utility.”

Rohan acknowledges that the effectiveness of Facebook advertising has been called into question, but says the company taking steps to win that debate by partnering with firms like Datalogix and Nielsen.

Shares of Facebook gained 4.9% Monday morning to $24.42. The stock is still down 8.4% year-to-date and down 36% in the nearly 13 months since its public market debut.

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disagree, who uses facebook anymore? registration might go up but that is in developing countries whereas in europe and north america is going down. and their advertisements are targeting users in the west than elsewhere in the world.